The country's sole manufacturer of large-scale integrated circuits - the miracle chip that has revolutionised electronics worldwide - can
expect even better times ahead.

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Palakunnathu G. Mathai at Mohali

April 30, 1987

ISSUE DATE: April 30, 1987

UPDATED: January 9, 2014 17:35 IST

SCL plant research lab: Bright future

When the chips are down, Semi-conductor Complex Ltd (SCL) gets going. Confounding its critics and bouncing out of the red, the state-owned enterprise has posted a profit of over Rs 83 lakh, doubled its capacity utilisation and ended the year with orders worth Rs 13 crore in its pocket.

The country's sole manufacturer of large-scale integrated (LSI) circuits - the miracle chip that has revolutionised electronics worldwide - can expect even better times ahead. So far the domestic market has been too small to permit full use of SCL's production capacity, and exports have been unattractive.

But with the rupee's gradual devaluation pricing out imported competition and making exports easier, the market has suddenly burgeoned. "For the first time customers are complaining that we aren't supplying them enough," says company Chairman and Managing Director Virendra Mohan.

The market could get still bigger in the future. For the Government is about to allow big business to get into user industries like digital watches and pocket calculators (reserved so far for the state sector and small-scale units).

And best of all, the Government will stipulate that both watch and calculator manufacturers cannot import the key input: the chip, SCL will, as a result, be able to hawk at least an additional Rs 6-crore worth of chips and modules every year. Indeed, it has already tied up with a Tata watch venture to supply up to two million watch modules. "The deal will be very lucrative," admits SCL's Mohan.

Certainly, all this heralds a long overdue blossoming for the chip manufacturer. Kicked off nearly four years ago, the Rs 50-crore project was expected to spearhead the electronics revolution, supply chips for the nascent telecommunications sector and spin-off a host of wares such as low-cost watches and home computers. But SCL has not quite attained its full potential, partly because it was caught between high costs and low volumes of production.

The telecommunications market failed to expand as originally envisioned, and computer manufacturers who use 16-bit microprocessors cold-shouldered the company's 8-bit microprocessors. "Companies abroad have declined to sell us the technology for 16-bit chips," explains Pushpendra Mankad, SCL's deputy general manager for marketing.

The result, predictably enough, is that barely 40 per cent of SCL's production capacity has been utilised, and sales have hovered between Rs 7 crore and Rs9 crore for the last three years. "We were at a dead end in the market and went through a period of gloom," admits Mohan.

Despondency, however, has given way to a renewed burst of hope at SCL's futuristic plant at Mohali, on the outskirts of Chandigarh. As Mohan puts it:" We see the light at the end of the tunnel. In three years time, we should be a Rs 40-crore company."

Others too endorse the point. Electronics Secretary K.P.P. Nambiar believes that the chip market will burgeon so rapidly in the next couple of years that the country will have to go in for another SCL-type unit.

"For the first time customers are complaining that we aren't supplying them enough,"Vihkndra Mohan chairman and managing director, SJCL

The scenario might have been altogether different were it not for the German mark and the Japanese yen soaring in relation to the rupee, as a result of which foreign modules have become prohibitively expensive for watch manufacturers.

Expectedly, they have turned to SCL over the last few months, and the company has had to harness 95 per cent of its production capacities, a far cry from last year's 40 per cent. And even this may not be enough: SCL's chairman talks of augmenting capacity with marginal investments.

For the longer haul, however, SCL has snared orders from Hong Kong for 6 million chips a year, equivalent to almost a third of its current capacity, and this is expected to pep up capacity utilisation at the upstream wafer fabrication facility.

Then, a defence services order for advanced circuits to be used for shells and guided missiles is in the bag, and the telecommunications market is looking up. "We expect between Rs 40 crore and Rs 42 crore worth of business from the telecommunications sector over the next four years," maintains Mankad.

Unquestionably, SCL has flourished in recent months because of the rise in foreign currency values. But successful attempts at upgrading technological processes have also cut costs and contributed to profits, while simultaneously expanding capacity at virtually no additional cost. After using 5 micron (equivalent to one tenth the thickness of human hair) geometry to manufacture chips, SCL switched to 3 micron know-how last year.

"With 5 micron technology, we used to get 800 chips from a four-inch silicon wafer," explains M.J. Zarabi. the company's general manager for research and development. "Now we are getting an average of 2,000, using 3 micron. So for the same amount of money we are getting two-and-a-half times more."

The upshot: capacity has expanded from around 9 million chips to 20 million chips. Even newer technological processes are in the pipeline: 2 micron geometry by next March and then 1.5 micron know how by 1988-89.

For all the innovation, observers put SCL on the firing line for going the whole hog into low-tech items like watches rather than operating on the frontiers of technology. Argues a former member of the SCL board: "SCL's main purpose was to supply chips to the telecommunications, process control and defence industries. This it has not done fully."

Critics also accuse it of having failed to hawk its wares aggressively, "SCL's biggest problem is weak marketing," says the former board member. Secretary Nambiar too echoes the point: "They've not had sufficient interaction with customers."

But Mohan counters: "Is there anyone who's using chips which SCL is not supplying?" Also, in order to stay alive financially, SCL has been forced to hawk its own as well as imported clock and watch modules (for which it was made the canalising agent) and Unicorn computers in order to generate sales volume.

But with the market for its own products now picking up, the sales volume may be big enough to help the company stand on its own feet - and to devote more attention to hi-tech areas like space and defence applications.

The biggest point of criticism when SCL was launched was that there would never be a large enough market in India for the chips the new venture would turn out. Now, however, that criticism is being answered. And hi-tech may finally be proved to be viable.

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